LOS ANGELES — Despite economic growth that is expected to continue trending lower than it did during the second half of last year, the nation appears to have dodged the possibility of a recession in 2024, and growth rates are expected to rebound heading into 2025, according to a UCLA forecast released Thursday.

"The oft-predicted but never seen 'recession next quarter' has now faded in the face of expansionary fiscal policy, a new national industrial policy and a consumer who is happy to continue spending," UCLA Anderson Forecast Director Jerry Nickelsburg wrote in his national economic outlook.

"As inflation slowly works its way back to the neighborhood of 2.2% to 2.7% per annum and is being kept high due primarily to residential rents, automobile repair and new health insurance premia, we expect Fed policy to take a neutral stance and economic growth to rebound to trend rates."

But Nickelsburg warned of continuing uncertainties — including the November presidential election that could potentially mark a shift in economic policies, and the lingering possibility of a government shutdown.

"These risks are substantial and bear watching as they could well drive the economy off of the current growth path that is predicted to return the U.S. economy to trend 2.5% growth," he wrote. "Due to those uncertainties, the forecast contains weaker business investment in the third and fourth quarters of this year corresponding to a wait-and-see approach by some firms until after the November election."

Nickelsburg noted that the last half of 2023 saw the U.S. economy grow much faster than the 2.5% average growth rate seen in recent years. The first quarter of 2024, however, saw growth beneath that trend, and that slowdown is anticipated to continue "for a few more quarters." But Nickelsburg noted that the slowdown is not necessarily portending a recession, since the economic pace is not due to a contraction in demand leading to a sharp slowdown in GDP growth and loose labor markets.

"This sounds as if the economy is on the verge of a recession, but there is a second way in which growth can slow," he wrote. "That occurs when demand is sufficiently strong for more rapid growth, but supply constraints are holding it back. These can take the form of tight labor markets or a lack of physical productive capacity and that is where we find the U.S. economy as we move into the summer of 2024. It also is consistent with persistently high inflation rates."

Nickelsburg said labor market constraints are expected to east through 2025 and 2026, thanks in part to higher wages encouraging more people to join the workforce.

"The construction of new factories and current industrial policy should also ease production constraints in 2025 and 2026 and will contribute to the slightly above-trend growth in our forecast. An important risk of the forecast, of course, would be a radically different economic policy after the November elections. We are assuming that regardless of the election outcome, this is not the case."